HOUSTON – A federal jury sitting in Houston has convicted Richard Plato, 64, of Baytown, Texas, on several counts in relation to a mail and securities fraud conspiracy, United States Attorney Kenneth Magidson announced today. The jury deliberated for approximately four hours following 10 days of trial. Plato was subsequently convicted on one count of conspiracy to commit mail fraud and five counts of mail fraud.

Plato owned and controlled Momentum Production Corporation in Baytown, Texas.

The Texas State Securities Board (TSSB) began investigating Plato in the fall of 2008 following several complaints by investors with Momentum. Investors from several states reported purchasing securities from Momentum, only to have Momentum default on the notes. The TSSB referred the matter to the United States Postal Inspection Service (USPIS) in 2010.

Evidence at trial indicated that Plato had been convicted of fraud on three other occasions, once each in Texas, Florida and Louisiana. At the time the securities were sold, Plato was on supervised release and owed almost $30 million in restitution.

Following his release from federal prison in 2002, Plato began acquiring various oil and gas interests in South Texas. Sometime thereafter, Plato formed Momentum and began directly and indirectly soliciting vulnerable persons throughout the United States to purchase promissory notes. Several of those investors testified at trial and described how they were assured of the investment’s safety, promised a high rate of return and told that the notes were secured by the oil and gas interests in South Texas. Although the notes were advertised as securities, they were never registered with any federal or state agency. Between June 2005 and December 2006, Plato sold more than $6 million worth of notes.

During the sale of these funds, Plato made various material misrepresentations and omissions, failing to disclose his criminal convictions and outstanding restitution obligations. In fact, Plato told investors the oil and gas collateral was owned “free and clear” of any claims, liens or other encumbrances and that, in the event of default in a particular fund, Momentum would substitute collateral from other funds to ensure payment. This was never done.

Agents testified that Plato made periodic payments on the notes to keep his investors satisfied, using the money of other investors and the operating income from the various oil and gas interests. In 2006, however, those interests evidently stopped generating their projected income. At the same time, Plato and his associates were spending millions of dollars that should have been paid to investors. Momentum soon began defaulting on the notes.

The money trail shows that, in total, Plato received approximately $6.2 million from investors. Of this amount, approximately $2 million was diverted to Plato’s benefit.

The defense attempted to convince the jury that Momentum’s collapse and the subsequent loss to the investors was caused, not by Plato’s embezzlement, but by a down turn in the oil and gas market combined with operational difficulties at the wells.

Plato faces up to 20 years in prison and a maximum $250,000 fine for each of six counts of conviction at his sentencing which will be set at a later date. He will remain in custody pending that hearing.

The case was investigated by the U.S. Postal Inspection Service. Assistant United States Attorneys F. Andino Reynal and Sharad Khandelwal prosecuted the case.